Energy on voters' minds as elections approach, API's Gerard says

Energy is clearly on voters’ minds as the 2012 elections approach, American Petroleum Institute Pres. Jack N. Gerard declared. Voters realize that federal, state, and local governments’ policies will determine the extent to which the nation’s considerable oil and gas resources are developed over the next 4 years, he said during one of API’s final Vote 4 Energy events.

“Energy is a top issue not just in the national races, but also in gubernatorial, state legislature, and city and county contests,” Gerard said. “We’re encouraged by the public dialogue we’ve found in our visits across the country. Voters understand that if we make the right decisions, Americans can enjoy substantial benefits from our oil and gas resources for decades ahead.”

Oil and gas is one of the few areas where construction job opportunities grew during the recession, which began in late 2008, noted Sean McGarvey, president of the AFL-CIO’s Building and Construction Trades Department.

Noting that oil and gas wages are double the national average, he observed: “It’s not just about job growth. It’s about the kind of jobs that will be created. There’s been a lot during the campaigns about protecting the middle class. This is a golden opportunity to put a stronger financial floor under it.”

US unconventional oil and gas resource development could directly and indirectly create nearly 2 million jobs by 2020 and 3.5 million by 2035 without any policy changes, an IHS-CERA study released on Oct. 23 concluded (OGJ Online, Oct. 24, 2012). API, the American Chemistry Council, the Natural Gas Supply Association, and the US Chamber of Commerce’s Institute for 21st Century commissioned the study.

‘Peel back the onion’

US oil and gas production growth and job creation could be even greater with more favorable policies, noted John W. Larson, vice-president of public sector consulting at IHS Global Insight and one of the study’s research directors, at the Oct. 25 Vote 4 Energy event. “It’s time to peal back the onion and look at the underlying facts of this shale energy revolution,” he suggested. “Even states that don’t have geologic players are benefiting.”

Larson said what IHS researchers call “the shale gale” had a tremendous countercyclical US economic impact during the recent recession.

“It put about $1,000 in every household’s pocket from lower gas and electric prices, and lower costs to manufacture goods,” he said. “The ability to have affordable, sustainable energy is an important aspect of economic growth. It’s important now to begin discussing the infrastructure we’ll need in the years to come—not just pipelines, but roads to and from production sites and assistance for communities to house and serve workers.”

Christopher Guith, vice-president for policy at the US Chamber’s Energy Institute, said the US energy risk continued to rise under current policies and regulations as the group released its 2012 index on Oct. 24. US oil and gas production growth will help reserve that trend, he told the API gathering.

“Most energy risks are economic, driven in part by high oil prices,” he explained. “The places where we get oil also have an impact. A barrel from Canada, where 90% of what we pay is returned to us as purchases of our goods and services, is different from a Venezuelan barrel, where we only get back 10%.”

Manufacturing response

Chemical and other manufacturers have responded to lower gas prices resulting from higher US production with plans to build new plants, officials from the American Chemistry Council and the National Association of Manufacturers noted.

“We’re producing our basic chemicals at costs about a third of what we were 5 years ago,” said Owen Kean, ACC’s senior policy director for energy. Other manufacturing plants will cluster nearby as chemical manufacturers spend millions of dollars to build new plants, he predicted. “With reports like this showing a durable and sustaining trend in the US, more of our companies and more of their customers are making investments here,” he said.

Ross Eisenberg, vice president for energy and resources policy at NAM, cautioned that despite the gas cost advantage, it still costs US manufacturers 20% more than their competitors in the country’s nine major trading partners to produce goods. “Regulations are still the biggest obstacle,” he said.

Guith said the burst of US oil and gas production growth happened so quickly that policymakers haven’t caught up with it. “They’re still trying to put there arms around it,” he told the API gathering. “The conventional wisdom has been turned on its head.”

Larson said policymakers should be ready to address impacts on communities and landholders from developing these resources, possible market problems if permitting processes aren’t improved and the necessary transportation to markets isn’t built, and ways to use the unique US combination of property rights and private investment to make sure projects can be built.